21
Capitalism: Degrading and destructive
Presented to the Capitalism Nature Socialism conference
‘Ecology, Imperialism and the Contradictions of Capitalism’ opening plenary:
‘Capitalism: Dynamic or doomed?’
York University, Toronto, 22 July 2005
by Patrick Bond[1]
University of KwaZulu-Natal School of Development Studies
and Centre for Civil Society (http://www.ukzn.ac.za/ccs)
1. Introduction: Stagnant, uneven capitalist development
The terms of reference for this panel – whether capitalism is ‘dynamic’ or ‘doomed’ - are polarising, in a manner likely to generate more controversy than careful analysis. My own sense is that neither description is appropriate, and that instead we should focus on the destructive and degrading character of a particularly volatile – and unevenly fragile – neoliberal capitalism. The left coalitions that are today most effectively contesting capitalism are already identifying ‘decommodification’ of life/nature and ‘deglobalisation’ of capital as central strategies within their struggles, and are linking these across borders so as to explicitly reverse the destructive and decaying aspects of the economic system, especially regarding its social, political, military and environmental manifestations. Neither ‘dynamic’ nor ‘doomed’ discourses about capitalism make these organic struggles any more effective.
Post-Keynesian economist David Felix has succinctly addressed the overall economic policy problem, namely the US and global ruling elites’ adoption – since the early 1980s - of a specific style of capitalism known as
…neoliberalism, with financial market liberalisation and heavy reliance on freely mobile international capital as its leading components. However, their adoption by the industrialised countries has been associated with exchange rate misalignments, excessive debt leveraging, asset price bubbles, slower and more unstable output and employment growth, and increased income concentration; and additionally in the developing countries by more frequent financial crises, exacerbated by over-indebtedness that forces many of them to adopt pro-cyclical macroeconomic policies that deepen their output and employment losses.[2]
Marxist political economists, in contrast, continue debating. Judging by the last two Socialist Register volumes, for example, divergent views continue over the nature of finance within the context of a slower-growing contemporary capitalism and more aggressive geopolitical and military imperialism. Harking back to an earlier debate between Rudolf Hilferding and Heinrich Grossmann,[3] some stress the power and coherence of finance within a restructuring, hegemonic capitalist economy; some the vulnerability and system-threatening contradictions associated with durable capitalist crisis and especially financial system fragility.
In the first category, Leo Panitch and Sam Gindin insist, ‘Clinging to the notion of that the crisis of the 1970s remains with us today flies in the face of the changes that have occurred since the early 1980s.’ Panitch and Gindin remind us, correctly, that the ‘opposition to [capitalism] is unable after three decades to mount any effective challenge,’ and hence their message is to redouble efforts to challenge ‘neoliberal and imperial legitimacy,’ rather than to expect or hope for ‘any sudden collapse.’[4] In the same spirit, Chris Rude provides a convincing statement of the way incidents like the 1997-98 Asian and Long Term Capital Management (LTCM) liquidity crises actually strengthened the system: ‘Financial instability and the economic hardship that it creates play an essential role in reproducing capitalist and imperial social relations. The financial instability is functional. It disciplines world capitalism.’[5] There is probably no more striking evidence of this than the ‘Volcker shock’ rise in the US interest rate in 1979, imposed by Federal Reserve chair Paul Volcker to halt inflation and in the process discipline labour [fig. 1], subsequently drawing the Third World inexorably into debt crisis, austerity, decline and conflict [fig. 2].
What, however, is the source, not only of recent economic volatility, but of the long slowdown in capitalist growth? The world’s per capita annual GDP increase fell from 3.6% during the 1960s, to 2.1% during the 1970s, to 1.3% during the 1980s to 1.1% during the 1990s and 1% during the 2000s [fig. 3]. (Moreover, GDP measures are notorious overestimates, especially since environmental degradation became more extreme from the mid-1970s, the point at which a typical ‘genuine progress indicator’ went into deficit [fig. 4].) We must also acknowledge the extremely uneven character of accumulation across the world, with some sites suffering declining per capita GDP [fig. 5].
In contrast to Panitch, Gindin and Rude, there have been several powerful statements about the ‘crisis’ faced by global – and especially US - capital in restructuring production systems, social relations and geopolitics for the long haul of accumulation under the thumb of Washington’s empire.[6] It would be tempting to draw upon sources like Volcker himself, who in 2004 publicly warned of a ‘75% chance of a financial crisis hitting the US in the next five years, if it does not change its policies.’ As he told the Financial Times, ’I think the problem now is that there isn't a sense of crisis. Sure, you can talk about the budget deficit in America if you think it is a problem - and I think it is a big problem - but there is no sense of crisis, so no one wants to listen.’[7]
From the standpoint of Marxian political economy, similar sentiments are regularly aired, based not only upon distorted US financial and trade accounts, but also underlying features of production, ecological destruction and social degradation. Yet amongst crisis theorists, disputes remain over the relative importance of class struggle (especially emanating from late 1960s Europe), international political conflict, energy and other resource constraints (especially oil shortages), and the tendency to ‘overaccumulation’ (production of excess goods, beyond the capacity of the market to absorb). For David Harvey, also writing in the Socialist Register, ‘Global capitalism has experienced a chronic and enduring problem of overaccumulation since the 1970s.’[8] Robert Brenner finds evidence of this problem insofar as ‘costs grow as fast or faster in non-manufacturing than in manufacturing, but the rate of profit falls in the latter rather than the former, because the price increase is much slower in manufacturing than non-manufacturing. In other words, due to international overcapacity, manufacturers cannot raise prices sufficiently to cover costs.’[9]
Whether this is a sufficient basis of proof has been disputed, for example by Giovanni Arrighi who observes ‘a comparatively low, and declining, level of over-capacity’, drawing upon official statistics.[10] Such data are not terribly useful for measuring overaccumulation, however, because year-on-year capacity measurement does not take into account either the manner in which firms add or subtract capacity (e.g. temporarily mothballing factories and equipment) or the ways that overaccumulation problems are shifted/stalled into other sectors of the economy.[11] In different ways, other political economists (Simon Clarke, Harvey, Ernest Mandel, Harry Shutt, Robert Biel) argued that the 1970s-90s global capitalist slow-down can best be traced to overaccumulation.[12]
Related debates unfold over what I take to be largely a symptom of capitalist crisis: declines in the corporate rate of profit. At first glance, the after-tax US corporate profit rate appeared to recover from 1984, nearly reaching 1960s-70s highs (although it must be said that tax rates were much lower in the recent period) [fig. 6]. On other hand, interest payments remained at record high levels throughout the 1980s-90s [fig. 7]. By subtracting real (inflation-adjusted) interest expenses we have a better sense of net revenue available to the firm for future investment and accumulation, which remained far lower than earlier periods. Furthermore, we can trace, with the help of Gérard Duménil and Dominique Lévy, the ways that US corporations responded to declining manufacturing-sector accumulation. Manufacturing revenues were responsible for roughly half of total (before-tax) corporate profits during the quarter-century post-war ‘Golden Age’, but fell to below 20% by the early 2000s.[13] In contrast, profits were soon much stronger in the financial sector (rising from the 10-20% range during the 1950s-60s, to above 30% by 2000) and in corporations’ global operations (rising from 4-8% to above 20% by 2000) [fig. 8]. We also know that since the Volcker shock changed the interest/profit calculus, there have been far more revenues accruing to capital based in finance than in the non-financial sector [fig. 9], to the extent that financiers doubled their asset base in relation to non-financial peers during the 1980s-90s [fig. 10]. Moreover, as Gerald Epstein and Dorothy Power show, rentier income doubled as a share of GDP from around 15% during the 1960s to above 30% for most of the 1980s-90s [fig. 11].[14]
More generally, the primary problem for those wanting to measure and document the dynamics of capitalist accumulation, has been the mix of extreme asset-price volatility and ‘crisis displacement’ that together make the tracking of valorisation and devalorisation terribly difficult. The volatility associated with ongoing financial processes and minimalist intrastate regulation is covered later, but Harvey’s analyses of spatio-temporal ‘fixes’ (not resolutions),[15] and of systems of ‘accumulation by dispossession’, are also appealing as theoretical tools. They help explain why ‘capitalist crisis’ doesn’t automatically generate the sorts of payments-system breakdowns and mass core-capitalist unemployment problems witnessed on the main previous conjuncture of overaccumulation, the Great Depression.[16]
2. Degradation through accumulation by dispossession
To be sure, the destruction associated with capitalist crisis tendencies – about which more information is offered in the next section - is accompanied by degradation associated with spatio-temporal fixes and accumulation by dispossession. Investigating these problems, perhaps the most important intellectual challenges are, as Rosa Luxemburg put it in her book The Accumulation of Capital,
how the right of ownership changes in the course of accumulation into appropriation of other people’s property, how commodity exchange turns into exploitation and equality becomes class rule. The other aspect of the accumulation of capital concerns the relations between capitalism and the non-capitalist modes of production which start making their appearance on the international stage. Its predominant methods are colonial policy, an international loan system - a policy of spheres of interest - and war. Force, fraud, oppression, looting are openly displayed without any attempt at concealment, and it requires an effort to discover within this tangle of political violence and contests of power the stern laws of the economic process.[17]
Are these early 20th century problems still ‘predominant’ in the early 21st century? For Luxemburg, a principle concern was ‘the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market.’[18] Simply put, ‘Capital cannot accumulate without the aid of non-capitalist organisations, nor … can it tolerate their continued existence side by side with itself. Only the continuous and progressive disintegration of non-capitalist organisations makes accumulation of capital possible.’ The crisis tendencies in turn generate a renewed reliance upon ‘primitive accumulation’ which remains one of capitalism’s persistent and permanent tactics.[19]
Following from these insights Harvey has shown that an extreme form of accumulation by dispossession characterises market penetration of non-capitalist spheres of life and nature. According to Harvey, the concept
reveals a wide range of processes. These include the commodification and privatisation of land and the forceful expulsion of peasant populations; conversion of various forms of property rights (common, collective, state, etc.) into exclusive private property rights; suppression of rights to the commons; commodification of labour power and the suppression of alternative (indigenous) forms of production and consumption; colonial, neocolonial and imperial processes of appropriation of assets (including natural resources); monetisation of exchange and taxation (particularly of land); slave trade; and usury, the national debt and ultimately the credit system as radical means of primitive accumulation.[20]
That these systems of dispossession today more explicitly integrate the sphere of reproduction – where much primitive accumulation occurs through unequal gender power relations – reflects a ‘reprivatisation’ of life, as Isabella Bakker and Stephen Gill put it.[21] To illustrate the degradation faced by Africans, the denial of access to food, medicines, energy and even water is the most extreme result; people who are surplus to capitalism’s labour requirements find that they must fend for themselves or die. The scrapping of safety nets in structural adjustment programmes worsens the vulnerability of women, children, the elderly and disabled people. They are expected to survive with less social subsidy and greater pressure on the fabric of the family during economic crisis, which makes women more vulnerable to sexual pressures and, therefore, HIV/AIDS.[22] Even in wealthy South Africa an early death for millions was the outcome of state and employer AIDS policy, with cost-benefit analyses demonstrating conclusively that keeping most of the country’s 6.5 million HIV-positive people alive through patented medicines cost more than these people were ‘worth’.[23]
The imposition of neoliberal policies in this spirit has amplified combined and uneven development in Africa and across the world. In macroeconomic terms, the ‘Washington Consensus’ entails trade and financial liberalisation, currency devaluation, lower corporate taxation, export-oriented industrial policy, austere fiscal policy aimed especially at cutting social spending, and monetarism in central banking (with high real interest rates). In microdevelopmental terms, neoliberalism implies not only three standard microeconomic strategies - deregulation of business, flexibilised labour markets and privatisation (or corporatisation and commercialisation) of state-owned enterprises - but also the elimination of subsidies, the promotion of cost-recovery and user fees, the disconnection of basic state services to those who do not pay, means-testing for social programmes, and reliance upon market signals as the basis for local development strategies. As Gill has shown, enforcement is crucial, through both a ‘disciplinary neoliberalism’ entailing constant surveillance, and a ‘new constitutionalism’ that locks in these policies over time.[24] Of course, in terms of empirical data, these are notoriously difficult areas of political economy and political ecology to measure and to correlate with accumulation, but the connections should be obvious.
One additional feature of capitalist degradation must be flagged, namely the extent to which the ecological basis of life is becoming ‘vulnerable’. For James O’Connor, the standard responses to capitalism’s ‘primary contradiction’ (crisis tendencies especially in the form of falling profits) have severe environmental implications, associated with a ‘second contradiction’: ‘when individual capitals attempt to defend or restore profits by cutting or externalizing costs, the unintended effect is to reduce the “productivity” of the conditions of production and hence to raise average costs’.[25] This problem emerges in part because when accumulation by dispossession as a capitalist strategy is applied to natural resources, ironically as an alleged ‘market solution’ to ‘market problems’ (such as pollution and global warming externalities), new crises invariably ensue. Elmar Altvater finds these strategies of ecological commodification ‘highly doubtful because of the “limits to growth”, the exhaustion of resources and sinks and because of military conflicts on resources (“new wars on resources”) in Africa and Latin America and in the middle East. Several wars have been waged on the domination over oil-territories and influences on the oil-price.’[26] Water wars are said to be emerging as the 21st version equivalent of petro-related conflicts of the 20th century.